The claim that Pakistan-backed 'fake Indian currency' notes were a major driver of the 2016 demonetization is partially supported by official admissions regarding state-sponsored counterfeiting, but heavily debated regarding the scale and actual impact of the exercise.
In 2012 during UPA stint itself; Indian authorities acknowledged in Parliament that counterfeit Indian currency was being printed across the border in Pakistan with backing by ISI and other channels and smuggled through routes like Nepal, Bangladesh, and West Asia.
In 2013, the report of Financial Action Task Force(FATF) said that the Indian currency is the third most counterfeited currency in the world.
According to National Crime Records Bureau (NCRB), the most counterfeited notes were the old Rs 500 notes, followed by Rs 1,000 and Rs 100.
From 2011 to 2015, more than 26 lakh fake currency notes, with a face value of Rs 167 crore, have been either recovered or seized by the RBI and the law enforcement agencies.
There are a few key elements to look into when it comes to "economic terrorism" :::
It is linked to threat perception posed by fake currencies.
Then - Inflation
As fake currencies pushes up the number of currency notes in circulation, which in turn would increase the demand for goods and commodities.
The rise in demand creates a scarcity of goods, which results in higher prices of products especially during peak seasons like festivals.
The fallout is -- currency devaluation.
In addition to these, counterfeit notes can cause a reduction in public confidence due to the aggravation of black marketing of goods, investment of participatory notes in the stock market and hoarding of precious commodities such as gold.
This leads to asset inflation, which increases the cost of living, thereby directly affecting the welfare of common people.
• A 2015 study by the Indian Statistical Institute (ISI), Kolkata, estimated that roughly Rs 400 crore worth of fake currency was in active circulation in the Indian economy prior to November 2016.
• High Rate of Note Return: According to Reserve Bank of India (RBI) data, approximately 98.96% (over 99%) of the demonetized Rs 500 and Rs 1000 notes were returned to the banking system, which critics and economists point out as an indicator that the vast majority of cash—real or fake—re-entered or was accounted for.
In 2016 after noteban was annoucned; 'India Today' in its cover story reported:
"The 'demon' in demonetisation is in the beginning, they say.
As demonetisation entered its third week, scenes such as this have become all too common, the country struggling to come to terms with Prime Minister Narendra Modi's black money hunt, the biggest such since Independence.
Various agencies have estimated black money (including but not only cash) at roughly 20 per cent of India's GDP, at over Rs 30 lakh crore (the World Bank said it was 23.7 per cent of the GDP in 2007; Mumbai-based Ambit Capital has put the figure at 20 per cent of India's $2.3 trillion, or Rs 156 lakh crore, economy).
But the move, unprecedented as it was (the earlier such measure in 1978 by the Morarji Desai government also targeted high-value notes but they comprised a tiny fraction of the total currency in circulation), has also badly hit several sectors of the economy, and much of the so-called informal sector, which is variously estimated to account for 45-60 per cent of India's GDP.
• Low Recovery of Fake Notes:
Official reviews and parliamentary replies showed that the actual volume of counterfeit currency detected and deposited during and immediately after the demonetization window was a fraction of pre-drive estimates (with cumulative recoveries tallying only a few crore rupees out of the Rs 14.18+ lakh crore demonetized).
Investigations by agencies like the National Investigation Agency (NIA) found that while fake currency networks did not vanish, post-demonetization seizures largely shifted toward lower-quality local prints or routes running through the India-Bangladesh border rather than high-end state-grade prints.
Demonetisation has hit multiple targets, and one certainly, is fake Indian currency notes in circulation.
The outcome is clear with violence in Kashmir reducing by 60 per cent, what with the Hurriyat Conference’s funds drying up.
In North East, militant outfits felt the bench. Militancy almost died 'natural death' in Garo hills in Meghalaya, I was told during my election coverage visit to some of these areas in 2018.
On 16 August 2013, a Lashkar-e-Taiba terrorist Abdul Karim Tunda was arrested by the special cell of Delhi police. Tunda was arrested in Uttarakhand’s Banbasa area, close to the Indo-Nepal border. This happened when he was trying to enter into India with consignments of Fake Indian Currency Notes (FICN) provided to him. During the interrogation, it came to light that FICN were provided to Tunda by Pakistan’s ISI.
Faking or counterfeiting the currency notes of a country is considered as one of the world’s oldest professions.
Historically, in most cases, counterfeiters were individuals or groups. They counterfeited money for their own profit or expenditures. However, in modern history, this tactic has been employed by several sovereign nations.
ends
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